Understand Your Rights. Solve Your Legal Problems
Lawyer Monthly last had the opportunity to talk with Romain in 2021, where he spoke on the effectiveness and impact of pandemic regulations. As the geopolitical landscape shifts further with changing public health measures and the ongoing Russia-Ukraine war, creating new risks for businesses and governments to face, he has once again given us an exclusive interview to discuss the challenges ahead.
To reiterate from our past conversation, world governments have all taken drastic measures which had hitherto been unprecedented, not only to contain pandemic but also to support the economy. For the first time in the history of the modern world, public debt and the convergence criteria were no longer a variable in the equation that had to be taken into consideration. The dogma of the public deficit has been temporarily set aside, sacrificed on the altar of protecting populations.
In a sort of general alignment, governments have succeeded in overcoming tension or enmity to succeed in conducting a policy of general interest. It was quite fascinating to witness this near unison. It must be kept in mind that with the pandemic being global, no one could afford the luxury of placing political or diplomatic ideology ahead of public health. In France alone, the COVID debt is more than €600 billion. Colossal.
I have just returned from Mauritius where our Group has opened a strategic centre supervising our interventions on the African continent. The local population salutes the decision-making of Prime Minister Pravind Jugnauth, his responsiveness and the ties he has been able to strengthen with friendly countries for the purpose of serving the local population. His attitude made it possible to convince even part of the population among whom the protest was mounting after the legislative elections of 2019.
However, the fear of reviving a global COVID wave as we experienced at the beginning of the pandemic is leading some governments to take measures that can be described as excessive. I am thinking in particular of the preventive confinement of part of the Chinese province or the isolation measures taken by the state of Hong Kong where families are sometimes separated in prefabs. It is to be feared that the sacrifice of the public deficit on the altar of health preservation risks mutating into a sacrifice of individual freedoms on that of prevention.
It is important to remember what the “black swan” theory is. The black swan theory, developed by statistician Nassim Taleb, notably in his essay ‘The Black Swan: The Power of the Unpredictable’, is a theory according to which a black swan is a certain unpredictable event that has a low probability of occurring and which, if it occurs, has far-reaching and exceptional consequences. Taleb describes the black swan problem as "escaping the use of degenerate metaprobabilities".
The dogma of the public deficit has been temporarily set aside, sacrificed on the altar of protecting populations.
The importance of the metaphor is that it constitutes an analogy showing the fragility of systems of thought. A set of conclusions is potentially refuted as soon as one of its fundamental postulates is disproven. In this case, the sighting of a single black swan could disprove the logic of a system of thought, as well as any reasoning that followed the same underlying logic.
This is exactly what happened with the COVID-19 pandemic and, to another extent, with the war in Ukraine. In the first case, this was because no one had included such a scenario in their economic planning for a single moment, and therefore this unpredictability of the event – coupled with its utterly unknown duration and consequences – totally paralysed and then turned the world economy upside down. The choice of increased outsourcing decided by many business leaders, strongly developed in recent years, led to the fact that, when strict confinements became generalised and freight and logistics problems appeared, production chains complete were shut down and then, when they restarted very slowly, continued to be disrupted for many months.
In the second case, it is the international response and its economic and political consequences, particularly in terms of sanctions, which had been underestimated or little considered. The conclusion is clear; risk management is the assessment of a situation or strategic planning which must be fully appreciated by broadening the spectrum of “reasonably possible”. Alternative plans – at least two – must always be associated as part of governance planning.
It is obvious, and it has been confirmed. Take a look today at the strongly encouraged notion of teleworking, which has even become mandatory in some cases. Such a measure before the pandemic would simply have been unthinkable. There has never been so much co-working space development. Many office floors no longer find takers, and market prices have changed post-pandemic. With a drop in France of 42% in investments and 45% in leases, under the shock of the global pandemic, 2020 was the worst year for the tertiary real estate sector in twenty years.
If the office is not dead, the coming months will be synonymous with the rationalisation of surfaces. During each crisis, the primary reflex is to revisit the issue of the real estate footprint, the second cost item for businesses. Today, new workspaces are emerging which aim to improve the daily lives of employees required to officiate face-to-face. Many real estate groups now offer annexes – satellite structures of reduced size – hosting a company in a privileged setting a short distance from the places of residence of employees, accessible 7 days a week according to needs.
During each crisis, the primary reflex is to revisit the issue of the real estate footprint, the second cost item for businesses.
Flexibility seems to have become audible again for everyone. The “usual place of work” within the meaning of labour law, which was a more than essential concept, will end up becoming quite relative. The autonomy of employees is increasingly extended. More than 72% of weekly meetings are now held in dematerialised format, no longer because the pandemic risk requires it, but because, ultimately, it has become part of our habits. This has also prompted digital majors to develop new dematerialised meeting platforms with new features and numerous refinements.
This ties in perfectly with what I mentioned earlier. The international response in the aftermath of the Russo-Ukrainian conflict, its uniqueness in decision-making by the international community and the speed that followed had undoubtedly been completely underestimated. However, the resulting consequences are obviously eminently harmful due to the increased globalisation that governs international economic relations today. The ban on access to the SWIFT network – even if it spared the banking institutions on which international trade is more dependent – has put a sharp and brutal brake on global economic flows.
In addition to the United States, it should be remembered that the sanctions taken by the European Union in financial and commercial matters have been strong: limitation of access to the primary and secondary capital markets of the EU for certain Russian banks and companies, a ban on transactions with the Russian Central Bank and the Central Bank of Belarus, a ban on supplying banknotes denominated in euros to Russia and Belarus, prohibition of any public financing or investment in Russia and even prohibition of investing in projects co-financed by the Russian Direct Investment Fund and of contributing to them. The European Union has also banned coal imports from Russia, exports of goods and technologies in the oil refining sector to Russia and new investments in the Russian energy sector.
The impact on global transport and cargo has also been particularly significant, with the closure of EU airspace to all Russian-owned and Russian-registered aircraft, the closure of EU ports to shipping companies, the ban on Russian and Belarusian road hauliers from entering EU territory and the ban on exports to Russia of goods and technologies in the aviation, maritime and space sectors. Russia's responsive sanctions obviously had a particularly big impact as well. It is the whole of world trade that has been impacted.
It is always extremely complex to weigh the pros and cons of leaving a country, even for good ideological reasons. First, because the economic reason, a fortiori in the case of an entity of tens of thousands of employees, requires reasoning as a captain of industry, and not as a philanthropist or a conscientious objector. To blame entities, decried for not having ceased their activities in Russia, is to establish an unhealthy connection with any political endorsement of the decisions taken by the authorities.
It is always extremely complex to weigh the pros and cons of leaving a country, even for good ideological reasons.
First there are the consequences for the overall balance of a group, which can be dangerously endangered when a single branch generates a high ratio of total turnover in Russia, which can push to carefully assess this type of decision.
Next, it should be remembered that the first companies that were led to withdraw from Russia – and which communicated widely about it – were those that did not generate significant turnover there, which was therefore more of a PR opportunity than a real economic sacrifice. Many of those who finally decided to withdraw from Russia did not do so by choice but quite simply because, faced with serious supply problems due to the sanctions, they could not do otherwise. This was the case, for example, of Decathlon which, unable to find alternative suppliers in China or Russia, resolved to temporarily cease its activity.
Philippa Foot's tramway dilemma takes on its full meaning here. Take the risk of staying and being portrayed as a financier of an abject war by paying a tax to the Putinist state, or leaving and taking the risk of being nationalised and losing millions of euros in investments that will eventually be recovered by this same state. Another question then arises: in terms of economic stakes, what would benefit the Russian state the most?
Moreover, to speak of a “mass departure” is quite popular. L'Oréal, for example, has announced the closure of its 40 stores, but has kept its production plant in Vorsino. Renault has still not withdrawn from the shareholding of the Avtovaz Company – the Russian manufacturer of the LADA brand – of which it owns 68% alongside the Russian state’s 32%, and Accor has not abandoned its portfolio of 56 hotels on Russian territory.
The choice must obviously be dictated by one's conscience, but we must measure the chance such a departure within the framework has of benefiting the Ukrainian cause against the consequences in economic and social matters, particularly in terms of jobs destroyed, that such a decision may induce.
If addiction is the mother of all evil, autonomy is the key to freedom. The European doctrine in force for decades was to strengthen its economic ties with Russia in order to obtain security and stability in relations. It is clear that the result is strictly not up to par, but more importantly, such a strategy generated a real energy dependence. In the same way that too much outsourcing induces dependence on subcontractors – as we have already mentioned in relation to the COVID pandemic – which in the event of a crisis and unexpected event impacts the entire chain of production, an energy dependence with a third state, even if it were a friend for a day, can have dramatic consequences in the event of a diplomatic reversal.
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Know how to produce in-house and not depend on anyone. This is the obvious, quasi-survivalist asset that governments and businesses alike need to keep in mind. And what you cannot produce, or what you have to buy if you stick to absolute advantage theory, you have to get from enough different people so that in a crisis, you can always keep an alternative solution.
As far as Asia is concerned, we opened a branch in Singapore last year, which allows us to reach out to all the Asian territories that we had identified. In Africa, we have just opened an operational base in Mauritius, from which we operate throughout Africa, whether in the context of the internationalised growth of our private clients or the public policies of our institutional clients.
2022 should be a particularly interesting year, culturally and structurally.
Advanced discussions with tactical, legal and managerial groups in the Emirates will allow us to conquer new market shares in a territory in which we have already been well established for years. The United Arab Emirates, as I told you earlier, have developed a particularly intelligent and attractive policy for welcoming start-ups.
In addition, because we act as a strategic advisor for many tech organisations, the new task force that we are developing around this area is certain to become an essential operational tool for them.
There are a number of achievements of which I am proud, but on which I cannot speak publicly. However, one of my greatest prides is to have succeeded in creating a firm which, each year, manages to come to the aid of the most disadvantaged by the financing of public utility programs in Africa and in Sri Lanka by setting aside part of our profits. The tactical support that we provide our customers on a daily basis through this measure is supplemented by vital operational support to the disadvantaged, which meets basic needs where public policies meet their limits. This dimension is even more important in the current economic context.
We also organised a great charity evening on 25 March, during which an artwork auction took place. The proceeds from the sales, initially planned to build a school building in Sri Lanka, will make it possible to release emergency health and food aid for the country, which is suffering greatly from global tensions.
Romain founded GFK Conseils-Juridis in 2017. Today, the firm is present in Europe, the Middle East, the United States and Asia. Specialising in the definition of strategies, Romain has a strong reputation in the resolution of technically complex cases, from mergers and acquisitions to restructurings, through the drafting of laws that contribute to legislative and constitutional changes.
AWB founder Hans-Michael Wolffgang shares his insight in this article.
The attack, which violated international law, destroyed the post-war order, including the policy of détente in Europe. German policy at least was determined by the guiding principle of "change through trade" and assumed after the fall of the Berlin Wall that all states in Europe were united by the common interest of peaceful coexistence. This is how the growth of the European Union into an economic union, which increasingly became a political union, can be understood.
The core pillar, however, is the common economic basis. Within the European Union there is the internal market. With other European states there are either free trade agreements or strong economic ties. This also applied to Russia, at least until the war began. German companies invested in Russia; Russian companies invested in Germany and all of Europe. Unfortunately, that is over. German companies are withdrawing from the Russian market. Due to the economic sanctions against Russia or against Russian persons or organisations, the European market is now closed to Russian companies.
Numerous states in America and Asia have also introduced economic sanctions against Russia. Therefore, the Russian war against Ukraine not only affects European security and the economy, but the entire global economy. Trade and cooperation with the Russian economy is also coming to a standstill in these countries.
In many countries, the energy supply is dependent on oil and gas imports from Russia, but to varying degrees. This is especially true for Germany due to its long-standing low-priced and reliable supply of oil and gas from Russia. Trust in peaceful coexistence has made Germany dependent. An embargo would hit our own economy hard and make the now urgently needed investments in military security more difficult for state budgets. Whether an embargo would be effective is also questionable, as Russia will still find other buyers for its raw materials.
The global economy must try to keep trade relations as stable as possible despite the new security situation. The challenge will be not to let the conflict with Russia spill over into the global economy. We must prevent the aggressive policies of one country and the sanctioning of that country's economy from paralysing the global economy. It is important to limit the conflict and, for the rest, to continue to maintain international trade relations.
Due to the economic sanctions against Russia or against Russian persons or organisations, the European market is now closed to Russian companies.
This applies to the European Union's trade policy, which aims to combat the effects of climate change and achieve sustainable international relations, for example through bilateral free trade agreements. The current warlike events in Eastern Europe have hijacked the discussion and attention of politicians and the population. The long-term problem of climate change has been lost from view. Worldwide, though, this problem must be seen and solved.
However, the EU is only one actor in the global economy. Over the last few years, we have seen a global development towards “mega” free trade agreements. Examples of this are the NAFTA successor agreement USMCA (USA, Mexico, Canada), the Asia-Pacific Partnership CPTPP (Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam) or the new free trade agreement with a focus on Asia, the RCEP (Australia, Brunei, Cambodia, China, Indonesia, Japan, Laos, Malaysia, Myanmar, New Zealand, Philippines, Singapore, South Korea, Thailand, Vietnam).
The RCEP is the most populous and economically strongest free trade agreement. Through the membership of the People's Republic of China, it has the greatest global weight and will influence the entire world economy. It creates the world's largest production area and sales market. Neither the American nor the European economies can keep up with it.
If we look at the parties to the individual free trade agreements, we see that some countries are involved in different free trade zones at the same time. It will be interesting to see how the multiple memberships will affect the development of the agreements. For example, FTAs regularly aim to harmonise technical standards. Conflicts are therefore to be expected if there is no agreement on standards that apply in the same way in different free trade areas. Conflicts are also to be expected with regard to sustainable environmental protection policy. Some agreements provide for sustainability clauses (for example USMCA, CPTPP). The RCEP lacks such a clause.
It is to be feared that Russian policy is not only aimed at neutralising Ukraine, but also at destabilising security policy in Europe. I therefore expect sanctions against Russia to last longer. Economic relations with Russia will therefore not be possible for a long time.
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All the more reason for all internationally active companies to make an effort to be represented in the economically interesting markets. Due to the different free trade agreements, however, this can mean that global sources of supply, supply chains and sales markets become more difficult. It may mean that companies have to become more regionally oriented. Sourcing, production and sales will be regionalised. Technical and economic synergy effects will be lost as a result. However, I do not see the end of globalisation, but rather a shift towards glocalisation. Due to local or regional peculiarities, internationally operating companies will adapt their products to the respective local or regional conditions in terms of raw material procurement, design, technical standards, manufacturing process and marketing.
Hans-Michael Wolffgang, Founder
AWB Steuerberatungsgesellschaft mbH
Königsstraße 46, D-48143 Münster
Tel: +49 251-620-3069 – 140
Fax: +49 251-620-3069 – 1
E: Hans-Michael.Wolffgang@awb-international.de
Hans-Michael Wolffgang is the head of AWB, which offers specialised advice in the areas of customs, export control, value added tax and excise duty for internationally active companies. The boutique firm advises companies of all sizes and industries in these specialised areas. After many years of working as a university lecturer and judge, Hans founded AWB in 2005 together with colleagues from his consulting practice. AWB now has 35 advisors in its offices in Münster, Hamburg and Munich. Its team includes tax advisors, lawyers, economists and former customs and tax officials, as well as specialists from business and academic teaching who now use their extensive knowledge at AWB for the benefit of internationally active companies.
Jean Zhu, partner at Merits & Tree Law Offices, outlines these contract and infrastructure law challenges and how they can be dealt with at a project’s outset, delving into the construction climate of China itself as it begins a shift towards reducing its carbon emissions.
Construction contracts create mutually binding legal relationships between parties and reflect technical and commercial aspects of the project. When compared with other commercial contracts, an obvious difference is that construction contracts are often voluminous, being formed by several separate documents. A typical construction contract will include a contract agreement on key terms, specific and general conditions of contract covering substantive clauses, technical documentation, schedules, programmes, etc.
Notably, construction projects are singularly focused in subject, highly technical, and of high value. Construction works are usually carried out in the open air, meaning exposure to environmental impacts and physical conditions and difficulties, with a construction period that may span several years. As a result, parties involved in construction projects may face a wider range of risks during the course of the project than those in other commercial transactions. In this respect, a major concern of construction contracts is to allocate those risks in a fair and equitable manner through various operation mechanisms dealing with allocation – measures to be taken to manage such risk exposure and corresponding remedies.
Further, whilst contract law applies to construction contracts and other commercial contracts, as projects – especially infrastructure projects – relate to the public’s interests, there may exist mandatory laws relating to the construction sector on certain matters such as environmental protection, health and safety, labour, planning and permitting, technical criteria on certain fragment works, and others.
Standard form contracts are widely used in the construction industry. These standardised contracts are used to reduce transaction costs and establish best industry practices and customs. The most common standard forms of contract used internationally are FIDIC forms. Quite often, parties tend to adapt these standard forms according to the needs of the project with bespoke amendments.
When compared with other commercial contracts, an obvious difference is that construction contracts are often voluminous, being formed by several separate documents.
International construction projects are often large-scale, high-value and with various parties from different countries involved. The international element obviously enlarges the spectrum of project risks and also brings challenges both in law and engineering when devising contractual frameworks. That is why an international construction contract is always complex with greater details.
Clauses in an international construction contract not only deal with allocation of risk but have to be carefully assessed under governing law and local law where the project is located. Quite often a common term used in local law would be beyond legal expectation in a national sense. In addition, cultural and customary conflicts are also complicating factors. For instance, Chinese parties tend to participate in international construction projects as contractors and they are familiar with Chinese standards. Local subcontractors and labour know local standards well and many consultants from western countries are comfortable with applying developed regimes. These inevitably cause problems – usually delays in clarifying different understandings and customary practices – during the process of implementing the project.
Another typical instance is related to the baseline programme. The baseline programme is usually part of a construction contract and is supposed to be regularly updated to reflect actual progress so that the employer or the engineer can monitor the contractor's progress. However, Chinese contractors value merit over procedure and are accustomed to acting flexibly within an overall plan rather than an accurate and detailed programme as long as milestones are met.
Exposure to a larger spectrum of risks and different industry, legal and cultural backgrounds unsurprisingly complicate construction contracts, especially management of interfaces in separate contractual documents. Though almost all construction contracts will include a well-drafted interpretation clause for reducing repetition and avoiding ambiguity of terms in the body of the contract, it is still very common to find conflicting or competing clauses, which always raises legal issues in the dispute resolution process. In terms of technical standards, participants naturally tend to be influenced and guided by their backgrounds and domestic experiences, meaning that it is challenging to make use of standard terms, as these could be understood differently. Thus, it is normal for certification on contract compliance to be slow, which sometimes causes significant delays.
Quite often a common term used in local law would be beyond legal expectation in a national sense.
Another observation is that in many domestic projects, parties favour litigation or arbitration to resolve disputes directly over an escalating dispute resolution mechanism, despite the fact that this mechanism is recommended by domestic model forms for construction contracts. By contrast, to tackle differences and constructively build a good working relationship over years, parties to international construction contracts would have more initiative to invoke the multi-tier dispute resolution mechanism than domestic projects.
Whatever the complexity of the project and the sophistication of its key players, contractual mechanisms in the construction contract surround three core elements: the project itself, time to complete and amounts to pay. There are many sayings about pursuing a fair and equitable risk allocation and measures for managing exposure of risks to avoid future commercial disputes at the negotiation stage. However, whatever mitigation measures are taken, disputes and differences are unavoidable, owing to the inherent features of international construction projects. That is why I would suggest the starting point at the negotiation stage should actually be to devise an effective mechanism for handling disputes, i.e. governing law and dispute resolution clauses.
Governing law and dispute resolution clauses are called “midnight clauses”, indicating that parties usually pay less attention to these clauses than commercial ones at the negotiation stage. However, parties often realise the importance of the governing law and dispute resolution clauses after being involved in proceedings, which is very late in the process. It is essential for parties to fully understand their selection of a particular legal system and how clauses are assessed within said system, as well as the legal costs and implications for a chosen dispute resolution mechanism and forum. In my view, this should be a standard beginning step for managing disputes.
As discussed previously, the international element may expose parties to more significant risks than domestic ones as there exist more uncertainties in aspects of the modern global economy regarding the political, economic and legal environments of the state where the project is supposed to be built. In terms of risk allocation, all contracts pursue a fair and balanced allocation of risks between parties to realise the purpose of the contract with a reasonable price paid for quality performance. This is no different in international construction contracts, although in most instances parties are unable to bargain fairly as the employer frequently has a tight budget and contractors in a highly competitive market tend to compromise at the tender stage.
Standard forms of contract by international associations attempt to provide guidance or a reference of risk allocation best practice for international construction projects. For instance, the major terms of the FIDIC suite of contracts concern the allocation of risks in different manners for projects with different procurement methods and they are widely adopted with tailored amendments in practice.
Multi-tier dispute resolution clauses are not uncommon in international construction contracts, which is demonstrated as a constructive approach to manage differences before escalating to litigation and to effectively resolve disputes with limited disturbance to the construction progress.
I would suggest the starting point at the negotiation stage should actually be to devise an effective mechanism for handling disputes
The typical mechanism would involve advancing claims to the counterparty pursuant to procedures in the contract first. If no agreement is reached, it is relayed to the engineer or the employer’s representative for decision; if the decision is objected to, then it is submitted to the dispute review/adjudication board or combined dispute board, which will issue a non-binding or binding decision subject to terms. If one party is unsatisfied with the decision, it comes to the final tier which is frequently international arbitration.
It has been observed over recent years that, as international construction arbitration takes quite a long time and is costly, there is an increase in parties’ selection of international commercial mediation to resolve disputes and for major projects procured by state entities, contractors have gradually started to pursue treaty protection and initiate investment claims against the state.
Generally, financial remedies in the form of liquidated damages are available to parties, like liquidated delay damages for the employer and liquidated payment delay damages for the contractor. In some instances, parties may agree on a sole remedy clause by limiting remedies to liquidated damages with a cap. This sole remedy clause should be tested by the governing law as there are often legal restrictions on the validity and enforceability of such clauses. For instance, it is not permissible to exclude liability for personal injury or death to the contractual counterparty and liability for property damages to the contractual counterparty resulting from wilful misconduct or gross negligence under Chinese law. Moreover, Chinese courts may adjust the liquidated damages on a party’s application (i) if the liquidated damages are significantly higher than the actual losses suffered by the complying party; or (ii) if the liquidated damages are lower than the actual losses suffered.
Besides financial remedies, the complying party may take some courses of action as permitted in the contract, like suspension, termination, the employer’s withholding of payment and the employer’s notice to remedy defects, etc. For contractors, there may exist legal remedies of certain priority rights. For instance, under Chinese law, in the event of the employer’s failure to pay for the works, the contractor may claim priority right to compensation over such payment.
Key laws in the Chinese construction sector include the Civil Code of the People’s Republic of China (PRC), Bidding Law of the PRC (2017 Amendment), Construction Law of the PRC (2019 Amendment), Urban and Rural Planning Law of the PRC (2019 Amendment); and Law of the PRC on Environmental Impact Assessment (2018 Amendment).
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The State Council further has issued several administrative regulations on essential aspects of the administrative side like Regulation on the Implementation of the Bidding Law of the PRC (2019 Revision), Regulation on the Quality Management of Construction Projects (2019 Revision), Regulation on the Work Safety of Construction Projects; and Regulation on the Administration of Survey and Design of Construction Projects (2017 Revision), to name a few.
The Ministry of Housing and Urban-Rural Development, the National Development and Reform Commission (NDRC) and other ministries may release various implementation rules of administrative regulations as well as model contracts on domestic projects, like the recent Model Contract for General Contracting Project (GF-2020-0216) between an employer and a general contractor issued in November 2020. The Supreme People’s Court may also issue judicial interpretations and guiding cases for hearing construction-related litigation.
China pledged that it will peak carbon emissions before 2030 and achieve carbon neutrality before 2060 at the 75th annual session of the United Nations General Assembly in September last year. Following this, with various regulatory support, green and low-carbon energy projects like solar power plants, wind power plants, hydrogen energy projects and energy storage projects have become increasingly popular in the domestic construction sector, which has attracted investment funds. In addition, the NDRC and the other three Ministries recently issued a joint Opinion on Promoting Green Development of One Belt One Road. In this Opinion, China will strengthen international cooperation on the promotion of green development of the OBOR to establish a green development mode for the OBOR initiative by 2030. It reiterated China’s position that it will no longer invest in overseas coal-fired power plants to push forward energy transition and to adapt green development.
In line with this transition in energy and construction sectors in domestic and overseas markets, the contractual framework and mechanism may further address issues in project investment and implementation phases for unique features of green energy projects such as tariff structures, entailment, ecological and environmental assessments and permits, etc. On the legislative side, the adoption of the Law of Energy as basic law in the energy sector has been listed as one of the major items in the government’s working plan for legislation in 2022.
Jean Zhu, Partner
5th Floor, Raffles City Beijing Office Tower, No. 1 Dongzhimen South Street, Dongcheng District, Beijing 100007
Tel: +86 10 5921 0936
Jean Zhu has a combined background in materials, engineering and law. She is now a partner of Merits & Tree Law Offices based in Beijing and Shanghai with practice areas including dispute resolution, real estate & infrastructure and regulatory & compliance. Jean is a commercial and construction dispute lawyer with extensive experience in construction and engineering, cross-border transactions, international trade, insurance, bonds, agency, guarantees and product liability-related disputes.
Merits & Tree Law Offices (植德律师事务所) was established in 2006 under the name of Beijing Hawkhigh Law Offices and was renamed Merits & Tree Law Offices in 2017. Merits & Tree has a team of over 80 partners and 300 lawyers and legal assistants across offices in Shanghai, Shenzhen, Wuhan, Zhuhai, Haikou and its Beijing headquarters.
The international community has roundly condemned the unprovoked invasion and levied wide-ranging sanctions aimed at gutting the Russian economy and leaving the country unable to fund its war effort should this not serve as an adequate deterrent. In addition to government measures, significant pressure has been placed on international businesses to cut ties with Russia. Shell, Apple, Ford, FedEx and a host of other multinational companies have since announced their withdrawal from the country, often at significant cost.
These responses have not been unanimous, however. Several major organisations have opted to continue their operations in Russia, whether in whole or in part, for the foreseeable future. Justifications offered have typically related to contractual obligations or moral duties to existing customers in Russia. Others have simply remained silent.
The above is true for the legal sector as well. Law firms have been slower than most in announcing the actions they will take in response to the violence, with most official statements arriving weeks after hostilities were opened. Now, more than one month on from the beginning of the invasion, we have gained a more reliable picture of where law firms stand in relation to the ongoing conflict.
More than 20 international law firms operated in Moscow prior to 24 February. As of April, it appears that few if any will continue to maintain a presence there. Linklaters became the first major UK firm to announce its departure from Russia on 4 March. “Russia’s invasion of Ukraine is reprehensible and it is right that we stand together in condemning it,” the firm stated. “We will not act for individuals or entities that are controlled by, or under the influence of, the Russian state, or connected with the current Russian regime, wherever they are in the world.”
As of the end of the month, each of Linklaters’ fellow ‘Magic Circle’ firms had issued statements to a similar effect. By 10 March, Allen & Overy, Clifford Chance and Freshfields had each announced their intent to withdraw. Other departures included Dentons, DLA Piper, Norton Rose Fulbright, Hogan Lovells and White & Case. To answer our titular question, it appears that every international firm in Russia is leaving, at least in a physical sense.
Law firms have been slower than most in announcing the actions they will take in response to the violence.
The degree of firms’ scaling-down of operations, however, has not been universally consistent. Several have opted to close office locations but continue to work with Russian clients, sometimes including those that are sanctioned. For instance, while Latham & Watkins has elected to close its Moscow office alongside its peers, owing to “the violence in Ukraine and the needless human suffering taking place”, it has stopped short of ending its counsel of VTB Bank – Russia’s second-largest financial institution and the subject of sanctions by the US and other governments.
Several others have also opted to close physical locations but continue to work with Russian clients, some of which are currently under sanctions. These firms, however, appear to be in the minority, and generally eclipsed by high-profile leavers taking a more holistic stance. White & Case caused a stir with its swift move to drop its representation of state-affiliated Sberbank. Meanwhile, Baker McKenzie – the longest-surviving global law firm in Russia – has become a front-runner in the western legal community’s backlash against the Kremlin with its own measures. The firm declared an end to it 33-year tenure in the country and affirmed that it would not act for regime-associated clients “anywhere in the world.”
It is more difficult for law firms to cease their operations in a country than it is for most companies. Unlike other multinational businesses, firms cannot simply cut off support to local outlets with the potential to return when the environment has changed. Since the fall of the Soviet Union, firms have spent decades building Russian client loyalty that will undoubtedly evaporate if they pull their national presence.
Closing an office can be expected to have a similar effect, as lost local staff and the personal goodwill they have earned will not be easily replaced. And of course, this is to ignore the obvious legal obligations that a firm has to its existing clients.
It is more difficult for law firms to cease their operations in a country than it is for most companies.
But firms that might have been willing to “ride out” the reputational damage rather than give up their Russian operations may simply have their hand forced by sanctions. Particularly in the UK, there has been a surge of new amendments to sanctions legislation (and an increase in the number of entities to which they apply), with a potential risk of regulatory action and criminal prosecution for firms and individuals found to be in violation.
With a significant new range of sanctions inhibiting firms from receiving payment from or issuing payment to named individuals and organisations, the attraction of doing business with Russia is sure to diminish even for firms willing to risk a knock to their reputations. It remains to be seen just how far the list of sanctioned entities will ultimately extend, but it is a safe bet that it will not soon stop growing.
Beyond merely sitting out the war in Ukraine, we can expect to see many familiar firms become involved in legal action against Russia over its military activities. Some have already done so in the employ of Ukraine: acting on the government’s behalf, Covington & Burling filed a claim at the International Court of Justice in the early days of the conflict, demanding that Russia cease its attack. Ukrainian President Volodymyr Zelenskyy has also hired US firm Morrison & Foerster to counsel his office on US, UK and EU sanctions regimes, and attorneys from Los Angeles-based Quinn Emanuel Urquhart & Sullivan have been brought on to represent Ukraine before the European Court of Human Rights in a case accusing Russia of human rights abuses.
Other firms are assisting Ukraine by engaging in charitable support. Norton Rose Fulbright has also made public its intentions to collaborate with global partners to raise funds, “as well as providing pro bono support to those Ukrainians and others who are being forced to relocate”. Its peers have followed suit, with DLA Piper stepping in to run an advisory service for Ukrainians seeking refuge in the UK. We expect to hear further stories of charitable work on behalf of Ukraine in the months to come. It is also reasonable to expect that law firms serving Russian clients – particularly sanctioned individuals and organisations – will suffer ever-increasing negative media attention.
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It is too early to determine the impact of all this upon the Russian economy and the global legal sector, though it is certain to be without precedent in modern history. For the time being, we will continue to report on law firms’ activities in and around both Russia and Ukraine, and continue to hope for a swift resolution to the conflict.
My name is Hong Guo. I am a member of the Law Society of Canada, Saskatchewan and British Columbia, and the founder of Guo Law Corporation (“GLC”) in Richmond, BC. During my career, I have had the good fortune to amass over two decades of experience in business law and, along with my team, provide a range of legal services, including corporate and commercial law, international transactions and investment, immigration law and real estate.
But life is not without its ups and downs, and good fortune does not always last. This may be especially true in a business that grew very quickly, creating opportunities for human error and the risk that comes along with needing to place trust in people who may prove to be undeserving.
On 2 April 2016, I discovered that GLC’s bookkeeper and my most trusted employee turned out to be a con artist. Orchestrating a grand theft of $7,500,000 from GLC’s trust funds, he forged cheques and fled to China while his accomplice laundered the money through a government-controlled casino before squirreling cash and casino chips off to China.
When the local police did not investigate the theft in a timely manner, I had no choice but to face the crisis head-on and, in the months that followed, flew to China countless times to catch the thieves, all the while dealing with a financial wildfire burning at home. I could have declared bankruptcy. Instead, I chose to protect the livelihood of my clients, personally bearing huge financial losses by selling my real estate assets. I managed to cover the trust funds shortfall of all GLC’s clients so that not one person suffered any loss but myself.
Life is not without its ups and downs, and good fortune does not always last.
While mistakes may have been made in doing so, as famously stated by US President Teddy Roosevelt, “In any moment of decision, the best thing you can do is the right thing, the next best thing is the wrong thing, and the worst thing you can do is nothing”.
It has been quite a journey. Notwithstanding the 2016 April Fools debacle, let me tell you about happier times in the nineties and my journey as a university student arriving in Canada.
I was born in Beijing to a mother who was a medical doctor specializing in pediatrics. As the oldest in a highly educated family, I was driven to excel in my studies. So, after earning a BA with a History major at Beijing University, I ended up leaving China with a scholarship to attend the University of Regina where I completed a master’s degree in Social Studies.
Coming from a metropolis of more than 20 million people, my first thought on arriving in Regina was: “Where are all the people?” The next day, my sponsor took me for a drive around his “city”. When we stopped at a garage sale, the burly proprietor greeted me kindly in that down-home Saskatchewan manner I will never forget, asking me: “Hey there, where are you from?”
I only knew enough English at the time to tell him that I just arrived from Beijing the day before and, recognising the puzzled look he gave me, quickly added, “China”. During this exchange the garage owner also noticed I had my eyes fixed on an old bicycle tucked away in the corner of the garage and asked: “So you like that bicycle?”. When I responded with an enthusiastic “Yes”, he said; “Well then, it’s yours – welcome to Canada.”
Coming from a metropolis of more than 20 million people, my first thought on arriving in Regina was: “Where are all the people?”
After completing my master’s in Sociology, I received a scholarship from the University of Pennsylvania to seek a Sociology PhD. However, my professors convinced me otherwise. Given my Chinese background, English language skills and contacts at home, combined with rapidly increasing Sino-Canadian investment and trade, they suggested it would be more helpful for my career development to stay in Canada and study law. I am glad I followed their advice.
After graduating with a Juris Doctor of Law from the University of Windsor, I was immediately hired by a large law firm in Regina. Regina is the Capital City of Saskatchewan, the Canadian Province which is a major exporter to China of mining products (potash), as well as food and agricultural products such as wheat.
With no practising lawyers who spoke Mandarin in Regina at that time, I soon became a treasure trove of information for my colleagues and their clients. In return, their connections throughout Saskatchewan provided me with a vast array of professional opportunities and the benefits of an entirely new business network.
As a result, I gained specialised legal expertise in corporate law, including a myriad of business and real estate transactions such as intellectual property, branding, M&A and export trade.
But despite many new friends and colleagues throughout Eastern Canada, I decided to move west. Combined with Chinese immigration opportunities facilitated by the BC Busines Immigration Program (“BCPNP”), the increasing trade between China and Canada began pulling me towards Canada’s Pacific Rim Province of British Columbia. It was time to take my career to another level in Vancouver.
Located on Canada’s west coast, I foresaw niche possibilities to build trans-Pacific links focused on the economic and cultural exchanges between Canada and China and opportunities to provide legal services which were not addressing the needs of many Chinese-Canadian clients.
With no practising lawyers who spoke Mandarin in Regina at that time, I soon became a treasure trove of information for my colleagues and their clients.
I was absolutely right about the need to develop cross-cultural understanding between Canada and China, because the moment I set up shop in the business center of the thriving South Vancouver suburb of Richmond – in the heart of one of the most concentrated Chinese diasporas in the world – clients began flocking to my modest storefront office.
Canada is a Common Law nation and the legislation which governs corporate investment in Canada comes under by the Corporations Act. However, as a result of our Chinese-Canadian clients’ lack of familiarity with local business laws and culture, the sectors of investment I ended up focusing on most tended to follow the most pressing investment concerns and interests of my clients – namely their risk comfort thresholds and their desire to make safe investments which were secure.
Consequently, investments in real estate were on top the list. However, their investment desires also varied across the board: i.e. investments in commodities. And thanks to the practical experience I gained in Saskatchewan, I was able to immediately begin handling the full gamut of legal matters so that word of mouth allowed me to gain the trust of many new clients throughout the community within weeks of my arrival on the west coast. By filling these needs efficiently, the growth for GLC continued and was so explosive that, while my first “storefront” office was no more than 500 square feet, I needed to expand to a larger office of more than a twice the size within a year.
But even then, with the number of my employees growing from five to more than 20, I could not resist acquiring a spacious 10,000 square foot second floor office in a building across the street in 2013 to make room for the future growth of GLC. Located in the most prosperous business centre of Richmond, with a move-in date of July 2016, GuoLaw was on its way to becoming one of the largest Chinese law firms in Canada.
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Life was good until the grand theft of April 2016 changed everything. But no matter the struggle, life goes on and, as a legal professional, I remain fully committed first and foremost to supporting my community and furthering worthy causes by contributing my legal expertise and volunteering as a counsel for many local and national organisations.
While my philosophy is to serve, serve, serve, my creed is best summarised according to the teachings of the political activist, social critic and moral philosopher Mencius (372–289 BC), as follows:
Human nature is righteous and humane – and has an innate tendency towards goodness – pending that human nature is nurtured in a positive environment. Conversely, bad environments tend to corrupt the human will.
Hong Guo, Director
6061 No. 3 Rd #200, Richmond, B.C. Canada V6Y 2B2
Tel: +1 778-297-6560
Hong Guo is the founder and director of Guo Law Corporation. She has gained extensive experience in working with the Sino-Canadian business community, predominantly on commercial transactions in mining, energy, IT, natural resources and real estate. Her achievements in advancing Sino-Canadian business relations were recognised in 2002 by the People's Republic of China.
Guo Law Corporation is based in Richmond, Canada. The firm’s staff comprise both native Mandarin and native English speakers, enabling the team to communicate effectively and precisely with all of their client group. Their services focus primarily on corporate and commercial transactions, particularly M&A and investment. In its vision statement, Guo Law Corporation states that it aspires to “become the region's most reputable Sino-Canadian focused corporate law firm”.
Ordinarily, parents ought to have freedom of movement. However, this must be carefully balanced against a child’s best interests which include, amongst other matters, a child’s right to:
In Australia, the Family Law Act 1975 (Cth) governs parenting arrangements for children post-separation. Relevantly:
International child relocation differs from relocation domestically or interstate, as there is no concurrent legislation applying to prevent interstate relocation. However, the same principles apply in that interstate travel may not be in the child’s best interests or impact the child’s meaningful relationship with the other parent, may pose a risk of harm to the child being separated from their other parent, or otherwise impact existing parenting arrangements.
International child relocation differs from relocation domestically or interstate, as there is no concurrent legislation applying to prevent interstate relocation.
A parent seeking to move abroad with their child should in the first instance obtain the other parent’s consent. If consent cannot be achieved, then they will be required to participate in Mandatory Family Dispute Resolution (Mediation) to attempt to reach an agreement or otherwise file an Application with the Federal Circuit and Family Court of Australia permitting the relocation.
If a parent were to move to relocate internationally with the child absent such consent (where there are existing parenting orders or proceedings already on foot) then they risk committing an offence in the terms addressed above, and/or an order being made by the Federal Circuit and Family Court of Australia requiring their return. Alternatively, if the other country is a party to the Hague Convention on the Civil Aspects of International Child Abduction, then an Application may be made by the Department of Social Services (the Australian Central Authority) for the child’s return.
The potential difficulties are referred to above regarding the consequences where a party is found to have removed a child from their habitual place of residence. Also worth considering are the risk of costs and the disruption – particularly to the children – of moving and returning.
By obtaining consent, attending mediation to negotiate the relocation, or being the moving party in a court application.
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Considerations which should be made during a relocation includes what is in the child’s best interests and, practically, may include:
To provide you with advice so that you can make informed decisions about your options and avoid the consequences referred to above. It is also important that such advice is obtained at an early stage – ideally before steps have been taken for the relocation (or before the relocation occurs).
Carly Mirza-Price, Partner
Level 7/151 Clarence St, Sydney NSW 2000, Australia
Tel: +61 2 8289 5877
E: cmirza-price@millsoakley.com.au
Carly Mirza-Price is a partner in the Mills Oakley family law team in Sydney, with 12 years of experience working exclusively in the area of family law. She is trusted as a subject matter expert in a range of areas including property settlements (both married and de facto), parenting matters (domestic and internationally), binding financial agreements, child support, divorce and collaborative family law. In 2022 she was named as a Recommended Lawyer in the Leading Family & Divorce Lawyers in New South Wales, Australia.
Mills Oakley is a full-service premium commercial and personal service law firm in Australia with a national client base, over 110 partners and more than 700 staff. The firm was founded in Melbourne in 1864 and has been growing ever since. Mills Oakley works with a number of ASX200 clients and assists leading corporates in transferring their legal work from higher-cost firms.
The story began in the late 1980s. I worked for American Express Bank in a wealth advisory role and was shocked to hear so many investors’ stories of dreadful mis-selling and the downright fraud they had suffered prior to seeking assistance from AMEX. I could see how the very strict internal control framework which we had to work to in AMEX protected the clients and quickly gathered that very few British investment houses had similar protections in place at that time.
This led me to become interested in financial services regulation. In 1991 I took up an opportunity to establish the world’s first offshore enforcement function with the Isle of Man Financial Supervision Commission. It was a fabulous job. The island had become a refuge for UK advisors who had not achieved licensing under the UK Financial Services Act of 1986. They would form a Manx company using nominee shareholders and directors and under that cloak of anonymity carry on their (often fraudulent) investment business in the UK.
In those days the Isle of Man courts required a local cause of action to trigger civil discovery proceedings and police needed either a Manx victim or perpetrator. As a result of these legal restrictions, nothing had been done to help these investor victims. However, after the introduction of the Manx Investment Business law, the activity of these UK operators comprised unauthorised investment business (as the Manx company they were using did not have authorisation under the regulatory regime of the Isle of Man) and my division could take action.
It was my job to receive the investor complaints, investigate using statutory powers, get the company files from the company administrators offices, establish the beneficial ownership, track the assets, wind up the company in the public interest and through the position of Provisional Liquidator, deemed Official Receiver, recover the assets for the investors. I took over 50 cases to court during that period and used Companies Act disqualification powers to ban 12 directors.
We also assisted the UK regulator of the day, the Savings and Investments Board, to achieve the first offshore freestanding Mareva injunction in a case called SIB v Lloyd-Wright. These developments in effect ended offshore secrecy, the principles being quickly followed in cases across the Crown Dependencies, Caribbean and other British legal model offshore territories.
I took over 50 cases to court during that period and used Companies Act disqualification powers to ban 12 directors.
It is a time I remember as innovatory, where personal effort made a real difference and when I really learned about the terrible personal damage that happens to victims of fraud. Families split, marriages fail, homes are lost. Investigating and catching the baddies became a passion – and remains so to this day!
I took that passion to a new job in Jersey in 1999 when I was appointed Deputy Director General of the Financial Services Commission (JFSC). It was a big job. I was responsible for developing a team capable of bringing in an all-crimes anti-money laundering framework and devising a regime to regulate the trust company industry; investment advisors, managers and dealers and later looking at money services business including “non-fiat” currencies and various other areas. Across the same timeframe, we had to deal with the progress of the global unfair tax competition initiative and ensure all our regulatory framework was such that our financial services business held the information they would be required to produce.
During my ten years, we built a fabulous organisation, lifted the reputation of Jersey to that of a leading wealth management jurisdiction – and, of course, I learned a great deal about the way trust and company structures work, and can be abused, which has stood me in great stead in countless investigations. I left the Commission in 2009 and started Sator Regulatory Consulting Limited, which did what it said on the tin, and in turn merged that with BDO in 2016, exiting in late 2020.
It has been a great journey. One cannot ask more of a career than to have fun, help people and make some money! Now I have the delightful opportunity to “hand craft” a collection of appointments to match my favourite working areas – fundamentally financial services and investigations. Accordingly, I am particularly delighted to have taken up two key appointments, one as independent non-executive director of Santander International and the other as Chairman of Central Associates Limited.
One cannot ask more of a career than to have fun, help people and make some money!
Santander is an outstanding bank with a caring and professional culture and I thoroughly enjoy my interactions with them. I particularly enjoy the balance they achieve between being leading innovators on the one hand, yet maintaining a very prudent approach on the other.
Central is in an entirely different market sector, taking me right back to my love of investigations. The company is based in London, operates globally and undertakes investigation, intelligence and surveillance mandates for corporates and private clients.
Over the 13 years Central has been in business, we have taken on a broad range of work. The mandates vary widely but all focus on protecting or finding people, assets or information. Mandates can relate to private and highly personal matters, or be relatively public involving litigation support, establishing publicly disclosable evidence. Throughout our many assignments, the tasks have varied considerably, and subjects in these cases have ranged from rogue businesspeople and common fraudsters to high-profile political figures and kleptocrats.
It is through the creativity and skill of our worldwide investigative team that we are able to use multiple and varied avenues of intelligence to complete each instruction. Covert surveillance, human Intelligence (HUMINT) and desk-based investigations, for example, allow us to trace persons of interest, establish patterns of life, identify residential addresses, places of business and associated individuals.
In international tasks of this nature, our principal objective is to gain a complete and comprehensive understanding of the subject’s offshore structures and from this to flush out the various activities, relationships and assets to retrieve the misappropriated funds. We have also been able to reclaim regime assets looted from overseas governments and identify the wealth the subjects have derived from corrupt practices.
Our principal objective is to gain a complete and comprehensive understanding of the subject’s offshore structures
Across these assignments, significant assets and holdings of real estate (residential and commercial), have been identified and traced back to the subjects of our enquiries, who often use complex structures through nominee holdings and trusts across a range of offshore jurisdictions to obscure their nefarious practices. To date, we have conducted work on the ground in 38 jurisdictions, located across most of the earth’s continents.
I think half are personal attributes and half are knowledge-based. The personal attributes run on from my previous comments – the old saying “people buy people first” is very true. You cannot be sustainably successful in the long term if no one trusts you, no one likes you and you have a reputation for dumping others and only looking after yourself.
Of the knowledge-based skills, case mastery and organised working habits get you most of the way home, but I think there is another aspect worth mentioning, and that relates to commercial standards. Although the structures and transaction trails through which white-collar crime is effected are often very complex (and they need to be mastered), it is important to identify the points of dishonesty and/or points of conduct which run contrary to normal business practice and prevalent commercial standards. That is where the mischief will lie. To do this, one has to understand what normal, honest behaviour looks like for those types of transactions. From there it is much easier to demonstrate why the course which was taken was improper.
Male or female, I think one just has to go all in. The harder you work the luckier you get. I am a big believer in mastering the detail, being totally on top of the paperwork, gripping the evidence. Advocacy is fine, but demonstrable fact, clearly explained, wins cases.
That advice is aimed for the casework side of our working life, but it also applies to our role as line manager, team leader, director or indeed leader of a business. Avoid becoming one of those “bosses” who does not bother to read the minutes and has not learned the brief or reviewed the draft. I say ‘always sweat the detail.’ It may not be sexy, but it totally empowers you in any dialogue, whether with colleagues on an internal matter, in client interactions or across the courtroom or negotiating floor.
I think one just has to go all in. The harder you work the luckier you get.
On the advice list, I would also counsel people to be good colleagues. Help one another, be generous with your knowledge, be kind. It is not necessary to be personal friends with colleagues, but you do need effective working relations if you are to deliver the mission successfully.
The ICIJ is definitely an amazing organisation and much of their investigative work has certainly been in the public interest, although one can have an interesting debate on the sources and provenance of the data their work is based upon.
Those points aside, there is no doubt that people quite often dodge their tax. The poor do it alone, the rich with so-called professional advisors. Those who dodge tax or aid and abet tax evasion all commit criminal offences. They should be prosecuted.
I think investigations are often not progressed because there is misplaced mystique about “offshore”. There is a lot of misunderstood terminology, so people – even professionals – are not actually speaking the same language. People instruct us to look for trust bank accounts, for example, when a trust clearly cannot have a bank account; people instruct us to identify the beneficial owner of a trust when a trust clearly does not have a beneficial owner; people confuse a power of attorney with a nominee agreement, or shares held as nominee versus shares held under a declaration of trust.
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Requests which ask the wrong questions will inevitably not produce the answers required. Step one, therefore, is to work with an investigatory firm with solid offshore experience. Contact us!
Helen Hatton, Chairman
Tel: +44 020-7459-4650
Helen Hatton is the head of Central Associates Limited and, in addition to her roles mentioned in this article, is a Fellow of the Institute of Advanced Legal Studies, a Fellow of the Royal Society of Arts, a member of the Editorial Board of the Journal of International Banking Regulation and a Liveryman of the Worshipful Company of International Bankers. She has also been appointed to the Strategic Advisory Board of the International Fraud Group and is a recognised international speaker on regulatory and compliance topics.
Central Associates is a London-based intelligence and investigations firm. The company provides a broad range of bespoke services including people and asset tracing, litigation support and surveillance and counter surveillance.
Here, Andrea expands on our last discussion; what are the qualities of Swiss substantive law that make it such an appealing choice-of-law to international parties, and how has the COVID-19 pandemic affected the regulation of liability in commercial contracts?
The choice of Swiss substantive law remains a very popular choice in international commercial contracts (B2B), regardless of the origin of the parties. In ICC arbitration, it is traditionally the most frequently selected governing law from among all civil law countries.
For the sake of completeness, it should be noted that in B2C contracts (unlike in B2B contracts) the parties can only choose the applicable law within narrow limits.
There are many reasons. Besides being perceived as a “neutral” legal system, Swiss substantive law is popular with users around the world for its stability and business-friendliness, the latter also reflected by extensive party autonomy that allows the parties to contractually regulate nearly all aspects of their relationship (with regard to liability, see below).
Swiss law is codified law and thus more easily accessible than legal systems based on case law. Swiss statutes are deliberately worded in an understandable language for lawyers and non-lawyers. Federal laws are published on the Swiss government website in the three official languages (German, French and Italian) and sometimes an unofficial English translation is provided as well. Moreover, given the fact that fewer special laws exist compared to other countries, it is easier to keep on top of the applicable rules.
Furthermore, Swiss substantive law is predictable and there is little risk of contractual gaps resulting in invalidity of entire contracts. As long as the parties have agreed on the essential points of their contract, they have concluded a valid contract, and gaps are filled by recourse to general principles and statutory law. These default provisions principally correspond to international commercial expectations regarding the parties’ respective rights and obligations. Furthermore, in interpreting statutory law, Swiss courts take into consideration the reasonable and good faith expectations of the parties and the needs of commerce. This allows contracts to be much shorter and less exhaustive than in many other countries’ contract laws.
Swiss substantive law is popular with users around the world for its stability and business-friendliness
Nevertheless, Swiss law should not come to scene randomly – it is advisable to negotiate the choice of law and jurisdiction/arbitration clause early and to structure the contract accordingly.
Swiss contract law is very flexible. It is strongly based on the principle of freedom of contract, and few mandatory provisions on the exclusion or limitation of liability exist – with the most important mandatory provision stating that liability cannot be excluded for intent and gross negligence. In principle, no special notice (caps, bolded etc.) is required for limitation of liability germs to be effectively incorporated into a contract.
Since in B2B-relationships the rules applicable on general terms and conditions (standard form contracts) are rather light, liability can, for example, be excluded or limited to a much greater extent than under German law.
Finally, as noted above, fewer special laws exist in comparison to other bodies such as the European Union.
Limiting liability in commercial contracts has always been paramount and the respective provisions are usually the hardest negotiated clauses.
In light of the COVID-19 pandemic, the appetite for limitation of liability has of course become greater on the side of the supplying parties. For example, suppliers of goods wish to exclude (or at least limit) their liability for raw material shortages, closures of factories or delayed deliveries. On the receiving side, it is exactly the opposite. The recipients want to ensure that they receive the goods or services as agreed and that the supplying party takes all necessary measures to overcome COVID-19-related obstacles. In many cases, however, a somewhat balanced solution serves a good cooperation best.
With regard to the COVID-19 pandemic, it is usual to allocate the respective risks and limit (or exclude) liability by insertion of specific provisions in the contract that deal with the non-performance or delay in performance due to such events. This is often done by way of so-called force majeure clauses. Force majeure clauses typically excuse non-performance by a party of its contractual obligations where such non-performance is caused by a defined force majeure event (ideally explicitly including the COVID-19 pandemic). They further provide specific remedies or consequences (e.g. termination rights or obligations to re-negotiate the contract in good faith) if the force majeure event lasts for a defined period of time.
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Overall, Swiss (contract) law is very stable. Yet there are, of course, new challenges on the horizon. Take for example the increasing use of artificial intelligence, machine learning and big data and the question of who is liable for damages caused by artificial intelligence. The existing general principles of liability need to be stretched or even over-stretched to provide answers. The situation regarding liability can thus be unclear and the parties are advised to contractually set out their respective responsibilities and liabilities. Currently no formal change to the Swiss Code of Obligations is decided or planned in this respect, but Swiss courts will certainly, based on the general principles of law, modernise and further develop the general principles of Swiss contract law.
Andrea Haefeli, Counsel
Seefeldstrasse 123, PO Box 8034 Zurich, Switzerland
Tel: +41 58 658 58 58
Mob: +41 58 658 56 71
Fax: +41 58 658 59 59
E: andrea.haefeli@walderwyss.com
Andrea Haefeli is a counsel at Walder Wyss Ltd, one of the leading Swiss commercial law firms. She advises clients in all areas of contract, commercial and corporate law.
Andrea has profound knowledge of and extensive experience in commercial and contract law across various industries. Her key areas include sales and supply, manufacturing and other works, distribution and franchising, agency, service, rental and leasing, development, license, joint venture and cooperation agreements, IT contracts and General Terms and Conditions (GTC). She advises on such projects from the conceptual, drafting and negotiation phase to dispute settlement.
We speak with Fausto de Angelis on why this aspect of business is crucial for entrepreneurs and how it can best be included as part of a company’s strategy.
In my experience of providing legal business advice to SMEs, I am seeing how greatly corporate governance is growing in terms of importance as a “key success factor” in company strategy.
More people are now coming to realise that sustainable growth and ESG are crucial concepts for the strategic agenda of any company that aims to develop its business and increase its market share. The building of a strong and effective corporate model has clearly become one of the most fundamental parameters for measuring a company’s competitive advantage and sustainable growth prospects.
I see some other trends which, to certain extent, can also be seen as connected with corporate governance and which can be used as a booster to speed up their implementation within organisations. Hot areas at the moment include legal design, cybersecurity, artificial intelligence and fintech.
With the introduction of the Corporate Governance Reform in 2020 there is certainly much more of a focus among entrepreneurs on making sure corporate and organisational structure is sustainable and adequate to serve their business model. There is no doubt that the Reform represents a significant driver of change towards the strengthening of competences and tools in this side of business.
Sustainable growth and ESG are crucial concepts for the strategic agenda of any company
Over the last few years in Italy I have seen a much greater effort by businesses to achieve compliance with Law 231, which has imposed the use of internal control systems and risk assessments to address the criminal liability of companies.
It is always difficult to make predictions in such an unstable and changeable global business environment. I certainly see that in the future, legislators will be more committed to creating laws and regulations to prevent crises for companies rather than just inflicting sanctions. This is a significant evolution of business culture, at least for Italy.
A clear strategy for the development of corporate governance can bring tangible benefits to entrepreneurs, especially when they lead multiple businesses. Some of the advantages to be gained range from the clear identification of these various businesses in the right “boxes” to a more efficient asset allocation process, up to the creation of synergies and scale economies.
The first step should be to set the “tone at the top” in the sense that it is essential for a leading entrepreneur to enshrine corporate governance as a part of their company’s strategic plan equal to its business objectives. With this approach, entrepreneurs can ensure sufficient engagement of management teams and sufficient focus on the strategy’s company-wide implementation.
A clear strategy for the development of corporate governance can bring tangible benefits to entrepreneurs, especially when they lead multiple businesses.
In my eyes, one of the top priorities for any senior leadership team remains to develop a culture of leading by example – inspiring their organisations by doing business with integrity and making sure their corporate values are reflected in the execution of their strategy.
GCs, when present, can certainly become key “change agents” within the company and can support the leadership group in ensuring effective implementation of corporate governance.
Besides the pure legal support that they can provide, I believe that there is a great opportunity for GCs to make a meaningful difference through strategy planning and change management (including cultural change).
The cementing of greater and stronger corporate governance requires that the right strategy be put in place and developed using the right skills. It can be common to encounter serious challenges when such strategies are not well positioned by the senior management, or when the right talents are not invested in the project.
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From this point forwards for GCs, I foresee that “soft skills” will have a much greater impact on their roles. This is something that, at least in Italy, helps to more effectively facilitate the career development of in-house counsel.
When I give training on business law, I always stress the importance of certain aspects in order to identify the right resources and skills. For example, I believe that cross-functional development, positive “contamination” with different and complementary skills, and multi-jurisdictional expertise are always valuable features for a professional.
Fuasto de Angelis, Founder
FdA Law Firm – Legal Services in Business Law
Via Giuseppe Garibaldi, 55/D, 21020 Buguggiate VA, Italy
Tel: +39 335-640-2404
Fausto De Angelis is the founding partner of FdA Law Firm – Legal Services in Business Law. He is a business lawyer with an extensive international background acquired during his career as head of legal in various multinational companies. With more than 25 years of experience in negotiations, restructuring of operations and achievement of cross-border deals, he is a highly sought-after partner for large companies and SMEs which intend to start new businesses abroad or to strengthen their presence in the emerging markets. He also offers clients his managerial and entrepreneurial skills as part of his legal business advisory.
Over the past handful of years, the salaries of legal professionals have gone up considerably at top-paying firms. As firms compete for the best talent, differences between salaries are slight – if existent at all.
| Law Firm | 1st-Year Salary | 2nd-Year Salary |
| Allen & Overy | $202,500- $205,000 | $215,000 |
| Cahill | $205,000 | $215,000 |
| Clifford Chance | $205,000 | $215,000 |
| Gibson Dunn | $205,000 | $215,000 |
| Latham & Watkins | $205,000 | $215,000 |
* Based on Chambers-Associate’s 2021 salary survey
However, according to US News, the median salary of a lawyer in the US sat at $126,930 in 2020, meaning these firms, alongside others such as Cooley, Cravath, Fish & Richardson and Holwell Shuster, are offering their first-year employees almost double the professions average national salary. But how did these top paying law firms become so successful?
Founded in 1930, global law firm Allen & Overy “helps the world’s leading businesses to grow, innovate and thrive.” The firm’s founders, George Allen & Thomas Overy, aimed to build a commercial practice, with the firm’s reputation later made as a result of George Allen’s role as adviser to King Edward VII during the abdication crisis. By the beginning of the Second World War, Allen & Overy was well-established as a leading City law firm.
Over the decades, Allen & Overy has been involved in several major developments in the legal sector, including the firm’s work as an advisor in the first hostile takeover in London as well as arranging the first Eurobound in the 1960s, leading to the diversification of the firm’s practice from purely commercial to financial.
Fast-forward to the present and Allen & Overy advised on 12% more deals than any other law firm globally last year, according to its Global Snapshot for 2021. The firm now has 40+ offices around the world, employs 5,650 people, and saw 26% growth in its number of US partners.
Cahill Gordon & Reindel is a New York-based international law firm founded in 1919, initially under the name of McAdoo, Cotton & Franklin. The firm’s early work was primarily in financial and corporate areas, including a large international practice for investment banker clients.
By the end of the Great Depression, Cahill had expanded to handle bankruptcies, reorganisations and regulatory matters. However, it was during and after the Second World War that the firm truly began to flourish. In 1942, senior tax partner John Ohl assisted with the drafting of the wartime Excess Profits Tax Act as well as provisions to permit the five-year amortisation of war facilities. In 1943, John T Cahill argued before the Supreme Court on issues regarding chain broadcasting regulations in National Broadcasting Co. v. United States. The case is widely considered to be among the most significant cases ever concerning the authority and influence of the Federal Communication Commission.
As firms compete for the best talent, differences between salaries are slight – if existent at all.
Today, Cahill maintains offices in London, Washington DC and New York City, employing around 278 attorneys. In 2020, the firm saw gross revenue of $444,400,000 and was placed 91st on The American Lawyer’s 2021 Am Law 200 ranking.
Clifford Chance is a “magic circle” law firm headquartered in the City of London. Though founded in 1802, the Clifford Chance of today came into existence following the 1987 merger of Clifford-Turner and Coward Chance, forming a “pre-eminent law firm in Europe, taking the legal world by storm.”
The firm prides itself on being at the “forefront of developments that have changed fundamentally the management of law firms – from the adoption of IT systems and sophisticated document management processes to investment in 'best-in-class' learning and development to creation of efficient and cost-effective offshore legal support, administrative, business research and technology centres.”
In 2021, despite the coronavirus pandemic, Clifford Chance announced its sixth consecutive year of profit and revenue growth. For the year ended 30 April, the firm saw its revenue reach an impressive £1.8 billion.
Headquartered in the Wells Fargo tower in Los Angeles, Gibson Dunn is a global law firm founded by corporate attorney John Bicknell and democratic litigator Walter Trask in 1890. Judge James Gibson joined the firm in 1897, with the practice later merging with that of former Los Angeles City attorney William Dunn and former Assistant City Attorney Albert Crutcher, giving the firm the name it still goes by today.
Over the decades, the firm expanded and was hailed “The Rescue Squad” for its response and service to clients in legal need. By the 1970s, Gibson Dunn boasted offices in both London and Paris. Since 2000, the firm has further expanded into Europe as well as South America, the Middle East, and Asia.
Gibson Dunn now has 20 offices worldwide, staffed by more than 1,600 lawyers, and was hailed as the 2021 “Law Firm Of The Year” by Law360. In its Annual Report for 2021, Chair & Managing Partner Barbara L. Becker writes, “Our accomplishments this year have been remarkable. Clients continue to trust us with their most sensitive and high-stakes matters, and Gibson Dunn attorneys continue to meet this call to action time and again. The world has changed in many ways over the past two years; the pandemic continues to impact our lives and work. While we navigate this new world together, the strength of the Gibson Dunn community remains a constant [...] The Firm has never been stronger.”
American multinational law firm Latham & Watkins was founded in 1934, in Los Angeles, California, by Dana Latham and Paul Watkins. Watkins’ practice focused primarily on labour, while centred around state and federal tax law. Eventually, Latham came to serve as Commissioner of the US Internal Revenue Service under President Eisenhower, though their firm grew steadily at first. In 1960, Latham & Watkins employed just 19 attorneys, though, by the 1970s, the firm’s growth rapidly sped up. It opened new offices in New York, Chicago, Orange County, Washington DC, and San Diego. In 1990, Latham & Watkins opened its first international office in London and, since, it has continued to expand internationally. The firm now has 18 international offices with 3,000 lawyers across the globe. Over 60 languages are spoken by the firm’s lawyers. On the 2021 Global 200 survey, Latham & Watkins came in as the second-highest-grossing law firm in the world.
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After being named “Global Law Firm Of The Year” at the 2021 PFI Awards, Latham & Watkins said it was “honoured for advising on a series of complex transactions that “demonstrated skill in both cross-border advising and innovative structuring”. Over the past year, the firm worked on more than 80 project financings with an aggregate value of approximately $77 billion, spanning multiple sectors, from the development of battery storage to the development and financing of LNG facilities.
Among other notable transactions, Latham won praise for advising the lenders on Vineyard Wind, the first major offshore wind farm to achieve financial close in the US. A group of 25 banks took part in the syndication of the 800MW project off the coast of Massachusetts, which represents one of the largest investments in a single renewable energy project in the US.”
